Continuing focus on green or ESG issues

There is rising demand from investors for green funds and environmental, social and governance (ESG) funds in Hong Kong; indeed growth in sustainable investing appears to be a global trend. The Hong Kong Monetary Authority (HKMA) has incorporated ESG principles into its investment process and in March 2016, the Securities and Futures Commission (SFC) published its Principles of Responsible Ownership to encourage investors to engage with investee companies on significant ESG issues that have the potential to impact on the companies’ goodwill, reputation and performance.

On 7 May 2019, the HKMA issued a press release concerning the introduction of key measures on sustainable banking and green finance to support and promote Hong Kong’s green finance development.

In our newsletter of 24 October 2018, we discussed the impact on asset managers of the SFC’s paper published on 21 September 2018 entitled “Strategic Framework for Green Finance”.

In our newsletter of 25 April 2019, we discussed the SFC’s circular issued on 11 April 2019 setting out the SFC’s requirements and expectations in relation to funds marketed as having a focus on green or ESG investing.

Finally, in our publication of 24 May 2019, we reported on the consultation paper published on 17 May 2019 by the Hong Kong Stock Exchange on its proposals to strengthen the rules on listed issuers’ governance and disclosure of ESG activities and metrics.

Some would argue that sustainable investing is nothing new, and that the recent surge of interest in the subject is little more than a convenient marketing hook. This may be why the regulatory spotlight continues to be trained on green or ESG issues in the investment and capital raising sectors in Hong Kong.